Spirited Expertise for a Savvy Investor
By Alex Villasuso
If you’re an adventurous entrepreneurial millennial like me, you’re intrigued by the booming trend in craft beers and, especially, craft spirits. After all, I may have a few more decades of saving to do before I can drive a Bugatti, but the professional 20-something that I am now can enjoy immediate luxury-lifestyle gratification through an occasional sip of fine Scotch, bourbon or a premium aged rum.
The $200 billion U.S. beverage alcohol market consists of three distinct segments: beer, wine and distilled spirits. The distilled spirits segment makes up $76 billion. Over the past 15 years, distilled spirits has expanded into the fastest-growing segment of the industry, increasing market share from 28.7 percent in 2000 to 36.7 percent in 2013. This trend is forecast to continue through 2024, and is being driven by a shift in taste among younger adults who have historically been more inclined to drink beer, but are now preferring spirits.
As a result of this unprecedented spike in craft-spirit popularity, budding tastemakers want to know how to turn their home-based hobby into a business and well-seasoned investors are wondering how to capitalize on the opportunity.
Since 2009, more than 400 craft brands have opened in the U.S. One might wonder where all that funding came from, how they got distributors to notice them, and how they’ve built their brand.
In general, the early stage funding of independent and craft spirit brands has been financed on an individual “friends and family” basis. Once a brand gains local or regional traction, valuations climb and more sophisticated investors, including some big industry players, become investors. Until now, there has been no vehicle for early stage investors to participate in a “portfolio” approach. But that’s about to change.
You see, a team of savvy spirits-industry veterans has launched Brandtenders – an emerging spirit venture capital fund designed to unite the best budding spirit brand entrepreneurs with high-net-worth investors seeking an equity share in the escalating emerging spirits market.
“My partners and I were independently trying to raise money for our own spirit brands, and we realized we were running into the same people,” said Rodriguez, an industry veteran and sixth-generation member of the Bacardi family (yes, THE Bacardi family). Rodriguez spent 19 years working in the family business and is currently the founder of 4 Corners Spirits, a company dedicated to the development of premium alcoholic beverages.
With a proven track record of working together to deliver superior brand volume and value growth through complementary capabilities, the founders of Brandtenders have come together to launch the industry’s first-of-its-kind emerging and craft spirits investment fund. The novel program focuses on building a portfolio of early stage investments that will enable promising new independent brands to develop and grow into significant players in the premium and ultra-premium spirit space.
Meet the Team
The fund will be managed by Guillermo T. Rodriguez, Clive Kabatznik and Ken Sutter, an all-star team of industry experts with complementary capabilities in general, and commercial management, finance, accounting and private equity within federally regulated industries.
“There are many reasons why there continues to be a lot of excitement in the distilled spirits industry, one of which is today’s consumers search for brands that suit not only their taste buds but also their demands for quality products that fit their lifestyle occasions. As the larger industry players struggle to deliver against this consumer experience, it has opened a new opportunity for small distillers and entrepreneurs to develop and invest in quality spirit brands, while at the same time having some fun doing it,” said Rodriguez.
What makes the Brandtenders’ fund especially unique is the partners’ turnkey expertise from fermentation, aging and blending, to marketing and sales, distribution and finance, all in one place. The fund has industry veterans experienced in identifying the right brands and entrepreneurs and backing them while providing a broad range of expertise that exponentially increases a brand’s ability to stand out in a crowded market, offering investors in the space a much greater chance of success.
“Brandtenders is an alternative asset investment vehicle offering high-net-worth individuals and family offices a unique opportunity to participate in the booming North American craft spirits resurgence. The fund aims to generate venture capital type returns of over 30 percent per annum, rivaling the results of the more successful traditional Silicon Valley-based firms,” said fund manager, Clive Kabatznik. Clive brings extensive experience leading the acquisition, growth and sale of numerous private and public businesses and is currently the founder of Silverstar Holdings, a publicly traded company established to acquire, own and operate middle market companies.
Because of the trends in the spirits market, there is a huge need to differentiate. And, by approaching from a portfolio standpoint,the fund will provide growth capital, offer industry expertiseto support the brands development and, in return, gain equity.
“Brandtenders takes advantage of the tremendous investment opportunity around emerging spirit brands with high margins providing strong future cash flows. Our team will provide the necessary due diligence around all spirit acquisitions, identifying both innovative founders and developing strong potential start-up brands with character,” said fund manager Ken Sutter. Ken has over 30 years of industry experience, having served in many key roles including Global Controller for Bacardi Limited and CFO for Bacardi USA, making his expertise in premium spirits acquisition models invaluable.
The Route to Market
The fund has entered into a partnership with Fluid Spirit Holdings, an affiliated company that provides distilled spirit and development expertise along with sales, creative marketing and activation services to emerging spirit and wine brands. Fluid is able to provide Brandtenders with constant access to potential emerging spirit brands and portfolio investments. Fluid was founded by Todd Graham who built a legacy in the adult beverage industry as the founder of TEAM Enterprise, now the 8th largest marketing agency in the U.S. and former president of the Night Club & Bar show.
An initial fund raise of $30 million will provide investors access to 4-6 promising early stage opportunities at attractive valuations. Within four to six years, the fund will leverage Brandtenders’ vertical “route-to-market” team of industry experts to build its portfolio companies into credible industry brands that will garner excellent second and third round valuations and ultimately look to exit either through an industry trade sale or public offering. For investors, the minimum fund contribution is $1 million. The principals of the fund will commit a minimum of $2 million of their own capital to the portfolio as an expression of their commitment.
With the craft spirits space booming, the elements are in place for Brandtenders to revolutionize the approach to seed and early stage investments in nascent spirits brands to provide potential for unparalleled returns. For information about submitting a spirits brand proposal to Brandtenders, or request an investment prospectus, go to www.brandtendersfund.com or contact firstname.lastname@example.org.